Trial begins for Wall Street poster boy pinned for GFC

PROSPECTIVE jurors in New York were asked whether they had heard of "Fabulous Fab" on Monday as Fabrice Tourre, the former Goldman Sachs trader who who referred to himself with that nickname in an email, prepared to fight allegations that he misled investors about complex mortgage securities ahead of the 2007 financial crisis, landing them with more than $1bn (£662m) in losses when housing market imploded.

Judge Katherine Forrest asked the question while selecting the nine men and women who will weigh the facts in a high-profile case that will go over one of the most controversial episodes of the crisis.

Mr Tourre arrived early for the proceedings, which are expected to last three weeks. Wearing a dark suit and a bright patterned tie, he sat with his lawyers as the jury was selected. Some potential jurors were excused after admitting that they had views about the role that banks played in the housing downturn and that those views might affect their ability to weigh the facts fairly.

The Securities and Exchange Commission (SEC), the US regulator charged with policing the financial markets, alleges that while working for Goldman Sachs and working on an investment called Abacus, Mr Tourre failed to tell potential investors about the role of John Paulson, a hedge-fund billionaire, in the selection of mortgages that made up the investment. When these mortgages turned sour, investors were left with heavy losses, while Mr Paulson and his fund drew profits by betting against the investment. Mr Paulson is not accused of any wrongdoing. Goldman eventually agreed to settle with the SEC. The bank did not admit or deny any wrongdoing, and paid $550m to put the matter to rest.

But Mr Tourre disputes the SEC's claims. His lawyers are expected to argue that he was a relatively junior employee at the bank and that the investors who bought the Abacus investments and then lost money on them were sophisticated financial players, well versed in the ways of Wall Street, not a group of uninformed traders who were misled by the bank's marketing materials. Among those who lost money were ABN Amro, now part of Royal Bank of Scotland, and IKB Deutsche Industriebank.

Ahead of yesterday's proceedings, Judge Forrest summarised the SEC's case against the 34-year-old by alluding to a fairy-tale: that the French national "handed Little Red Riding Hood an invitation to grandmother's house while concealing the fact that it was written by the Big Bad Wolf".

For many Mr Tourre emerged as a poster-boy for Wall Street greed, following the disclosure of emails sent by the former Goldman trader as the toxic casserole of subprime mortgages was about to boil over. In one from 2007, he wrote to his girlfriend that the "whole building is about to collapse anytime now. Only potential survivor, the fabulous Fab... standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications".

In court on on Monday, his lawyer, Pamela Chepiga said that the email was in fact "an old fashioned love letter". "What this email expresses is the self-doubt of a young man about whom nothing is fabulous," she said. As for the nickname, it came from a colleague, not him, she added.